IRS: Two Methods to Adjust Withholding On Employment Taxes for Same-Sex Spouses

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By Lydia Beyoud  

Sept. 23 --Employers have two special administrative procedures to correct overpayments of employment taxes for 2013 and prior years for certain same-sex spouse benefits such as employer-provided health care or cafeteria plans, the Internal Revenue Service announced Sept. 23.

Notice 2013-61 adds to the guidance issued in Revenue Ruling 2013-17, released Aug. 29, which announced that the IRS would recognize all legally married same-sex couples for federal tax purposes regardless of where the couple lived (169 PBD, 8/30/13; 40 BPR 2081, 9/3/13).

The adjustment methods are both optional, and are intended to “reduce filing and reporting burdens associated with the optional retroactive application of the holdings” in the revenue ruling, the IRS said.

The first adjustment method allows employers to use the fourth-quarter 2013 Form 941, Employer's Quarterly Federal Tax Return, to correct the overpayment of employment taxes during the first three quarters of 2013.

The second alternative allows employers to file one Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund, for the fourth quarter of 2013 to correct the overpayment of Federal Insurance Contribution Act (FICA) taxes during all quarters of 2013, the IRS said.

For the overpayment of FICA taxes for earlier years, employers may make a claim or adjustment for all four calendar quarters of a calendar year on one Form 941-X that is filed for the fourth quarter of the year still open under the statute of limitations on refunds under tax code Section 6511, the notice said.

Normally, employers are required to file a Form 941-X for each calendar quarter for which a refund claim or adjustment is made. The second special adjustment method allows employers to report the adjustments for all four quarters on one form, the IRS said.

“In the case of adjustments, the period of limitations will not expire within 90 days of filing the adjusted return,” the IRS said.

Because the adjustment methods are not mandatory, employers may still use the regular procedures for correcting employment tax overpayments related to same-sex spouse benefits and remuneration paid to same-sex spouses, the notice said.

DOMA Overturned

Employers may have overwithheld when Section 3 of the Defense of Marriage Act was still in force on their same-sex married employees' federal employment taxes for items that would normally be excludable from income taxes, the notice said.

Section 3 of DOMA prevented the federal government from recognizing same-sex unions as marriages, even if they were recognized under state laws.

The Supreme Court overturned Section 3 of DOMA in late June (124 PBD, 6/27/13; 40 BPR 1589, 7/2/13), prompting the IRS to issue its August ruling that employers and individuals could follow marriage-related federal tax provisions, regardless of sexual orientation, both prospectively beginning Sept. 16 and retroactively under certain circumstances.

Thus, for purposes of Notice 2013-61, “employment taxes paid on after-tax amounts that were used to purchase health coverage for an employee's same-sex spouse” are treated as overpayments of employment taxes, the IRS said.

Additionally, same-sex spouse benefits include remuneration for services that is excepted from the definition of employment for FICA purposes under the holdings in Rev. Rul. 2013-17 because the services are within the exception of Section 3121(b)(3)(B) on services performed not in the course of the employer's trade or business, the notice said.


To contact the reporter on this story: Lydia Beyoud in Washington at

To contact the editor responsible for this story: Cheryl Saenz at

The full text of Notice 2013-61 is in the Text section.

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